X Financial Reports Third Quarter 2022 Unaudited Financial Results

SHENZHEN,China,Nov. 17,2022 --X Financial (NYSE: XYF) (the "Company" or "we"),a leading online personal finance company in China,today announced its unaudited financial results for the third quarter ended September 30,2022.

Third Quarter 2022 Financial Highlights

Total net revenue in the third quarter of 2022 was RMB894.6 million (US$125.8 million),representing a decrease of 7.2% from RMB964.4 million in the same period of 2021.

Income from operations in the third quarter of 2022 was RMB300.4 million (US$42.2 million),compared with RMB410.6 million in the same period of 2021.

Net income in the third quarter of 2022 was RMB211.7 million (US$29.8 million),compared with RMB267.2 million in the same period of 2021.

Non-GAAP[1] adjusted net income in the third quarter of 2022 was RMB231.1 million (US$32.5 million),compared with RMB277.0 million in the same period of 2021.

Net income per basic and diluted American depositary share ("ADS") [2] in the third quarter of 2022 was RMB3.96 (US$0.56) and RMB3.84 (US$0.54),compared with RMB4.80 and RMB4.68,respectively,in the same period of 2021.

Non-GAAP adjusted net income per basic and adjusted diluted ADS in the third quarter of 2022 was RMB4.32 (US$0.61) and RMB4.20 (US$0.59),compared with RMB4.98 and RMB4.86,in the same period of 2021.

Third Quarter 2022 Operational Highlights

The total loan amount facilitated and originated[3] in the third quarter of 2022 was RMB19,825 million,representing an increase of 31.4% from RMB15,085 million in the same period of 2021 and an increase of 17.5% from RMB16,879 million in the previous quarter. Xiaoying Credit Loan[4] accounted for 99.6% of the Company's total loan amount facilitated and originated in the third quarter of 2022,compared with 100% in the same period of 2021.

The total outstanding loan balance[5] as of September 30,2022 was RMB33,789 million,compared with RMB29,075 million as of June 30,2022 and RMB24,509 million as of September 30,2021.

The delinquency rate for all outstanding loans[6] that are past due for 31-60 days as of September 30,2022 was 0.77%,compared with 0.93% as of June 30,2022 and 0.96% as of September 30,2021.

The number of cumulative borrowers[7] was 9.7 million as of September 30,2022.

Total cumulative registered users reached 78.9 million as of September 30,2022.

Mr. Justin Tang,the Founder,Chief Executive Officer and Chairman of the Company,commented,"We are pleased with our operational and financial results in the third quarter. The loan facilitation amount reached the high end of our previous guidance,asset quality steadily improved,and both top line and bottom line saw sequential growth. Against the macro headwinds such as economic slowdown and consumption softness amid the COVID-19 resurgence,our performance further demonstrates our healthy fundamentals,effective strategic positioning,proven strategy,and strong execution capability."

"We believe China's consumer and micro and small businesses financing markets still have great potential and we are confident of delivering sustainable growth in the long term. During recent months,we continued to execute our share repurchase program initiated earlier this year. This share repurchase program is aligned with our commitment to enhancing shareholder value and reflects the Board's confidence in the Company's long-term prospects. Our Board further increased our share repurchase program to US$30 million. We believe that our business strategy and execution will continue to further enhance shareholder value in the long term."

Mr. Kent Li,President of the Company,added,"During the third quarter,our total loan amount facilitated and originated reached about RMB19.8 billion,an increase of 31.4% year-over-year and 17.5% quarter-over-quarter. We continued to improve our asset quality with prudent risk management. On a sequential basis,the delinquency rate for all outstanding loans past due for 31-60 days decreased from 0.93% to 0.77% as of the end of September. In addition,we further expanded our premium borrower base. Our number of active borrowers increased to 1.4 million in the third quarter,anewrecordintheCompany'shistory. This expanding premium borrower base has underpinned our quality growth during challenging times and laid a solid foundation for our future development. Moving ahead,we will continue to enhance our risk management and borrower acquisition efforts."

Mr. Frank Fuya Zheng,Chief Financial Officer of the Company,"We are pleased to deliver a steady financial performance in the third quarter. Total net revenue increased by 8.5% quarter-over-quarter to RMB894.6million,while net income increased by 14.0% quarter-over-quarter to RMB211.7million. We continued to deepen our collaboration with institutional funding partners to serve diverse personal financing needs and disciplined cost control measures to improve operational efficiency. Despite macro uncertainties ahead,we believe we are well positioned in the market with our trusted brand,strong technology and underlying earnings strength. We will strike a balance to drive long term growth and increase shareholder value through sound capital allocation strategy."

[1] The Company uses in this press release the following non-GAAP financial measures: (i) adjusted net income (loss),(ii) adjusted net income (loss) per basic ADS,and (iii) adjusted net income (loss) per diluted ADS,each of which excludes share-based compensation expense,impairment losses on financial investments and income (loss) from financial investments. For more information on non-GAAP financial measure,please see the section of "Use of Non-GAAP Financial Measures Statement" and the table captioned "Unaudited Reconciliations of GAAP and Non-GAAP Results" set forth at the end of this press release.

[2] Each American depositary share ("ADS") represents six ClassA ordinary shares. On November 19,2020,a ratio change that has the same effect as a 1-for-3 reverse ADS split took effect,and as a result,one ADS currently represents six Class A ordinary shares.

[3] Represents the total amount of loans that X Financial facilitated and originated during the relevant period.

[4] Xiaoying Credit Loan is a category of online personal credit loan products facilitated and originated through our platform,including Xiaoying Card Loan and other unsecured loan products we introduce from time to time.

[5] Represents the total amount of loans outstanding for loans X Financial facilitated and originated at the end of the relevant period. Loans that are delinquent for more than 60 days are charged-off and are excluded in the outstanding loan balance,except for Xiaoying Housing Loan. As Xiaoying Housing Loan is a secured loan product and the Company is entitled to payment by exercising its rights to the collateral,the Company does not exclude Xiaoying Housing loan delinquent for more than 60 days in the outstanding loan balance.

[6] Represents the balance of the outstanding principal and accrued outstanding interest for loans that were 31 to 60 days past due as a percentage of the total balance of outstanding principal and accrued outstanding interest for loans the Company facilitated and originated as of a specific date. Loans that are delinquent for more than 60 days are charged-off and excluded in the calculation of delinquency rate by balance. Xiaoying Housing Loan was launched in 2015 and ceased in 2019,and all the outstanding loan balance of housing loan as of September 30,2021,June 30,2022 and September 30,2022 were overdue more than 60 days. To make the delinquency rate by balance comparable,the Company excludes Xiaoying Housing Loan in the calculation of delinquency rate.

[7] Represents borrowers who made at least one transaction during that period from the commencement of the Company's loan facilitation business to a certain date on the Company's platform.

Third Quarter 2022 Financial Results

Total net revenuein the third quarter of 2022decreased by 7.2%to RMB894.6million (US$125.8million) from RMB964.4million in the same period of 2021,primarily due to a decrease in average total borrowing cost of the borrowers; and also partially offset by an increase in the total loan amount facilitated and originatedthis quarter compared with the same period of 2021.

Loan facilitation service fees in the third quarter of 2022 decreased by 25.2%to RMB502.0million (US$70.6million) from RMB670.9million in the same period of 2021,primarily due to a decrease in average total borrowing cost of the borrowers; and also partially offset by an increase in the total loan amount facilitated this quarter compared with the same period of 2021.

Post-origination servicefees in the third quarter of 2022 increased by 8.6%to RMB96.0million (US$13.5million) from RMB88.4million in the same period of 2021,primarily due to the cumulative effect of increased volume of loans facilitated in the previous quarters. Revenues from post-origination services are recognized on a straight-line basis over the term of the underlying loans as the services are being provided.

Financing incomein the third quarter of 2022 increased by 46.0%to RMB251.6million (US$35.4million)from RMB172.3million in the same period of 2021,primarily due to an increase in average loan balances compared with the same period of 2021.

Other revenue in the third quarter of 2022 increased by 37.7%to RMB45.0million (US$6.3million),compared with RMB32.7million in the same period of 2021,primarily due to an increase in referral service fee for introducing borrowers to other platforms.

Origination and servicing expenses in the third quarter of 2022 increased by 11.7%to RMB540.5million (US$76.0million) from RMB483.8million in the same period of 2021,primarily due to the following factors: (i) an increase in commission fees resulting from the increase in the total loan amount facilitated and originatedthis quarter,(ii) an increase in interest expenses as a result of the increase in payable to institutional funding partners,and (iii) partially offset by a decrease in insurance fee paid to insurance company.

Reversal of provision for accounts receivable and contract assets in the third quarter of 2022 was RMB4.4 million (US$0.6 million),compared with provision for accounts receivable and contract assets of RMB15.2million in the same period of 2021,primarily due to a decrease in the average estimated default rate compared with the same period of 2021.

Provision for loans receivable in the third quarter of 2022was RMB17.2million (US$2.4million),compared with RMB10.2 million in the same period of 2021,primarily due to an increase in loans receivable held by the Company as a result of the increase in the total loan amount facilitated and originated this quarter compared with the same period of 2021,and partially offset by a decrease in the average estimated default rate compared with the same period of 2021.

Income from operationsin the third quarter of 2022was RMB300.4million (US$42.2million),compared with RMB410.6million in the same period of 2021.

Income before income taxes and loss from equity in affiliatesin the third quarter of 2022was RMB302.9million (US$42.6million),compared with income before income taxes and gain from equity in affiliates of RMB385.2million in the same period of 2021.

Income tax expense in the third quarter of 2022was RMB91.1million (US$12.8million),compared with RMB119.5million in the same period of 2021.

Net incomein the third quarter of 2022was RMB211.7million (US$29.8million),compared with RMB267.2million in the same period of 2021.

Non-GAAP adjusted net income in the third quarter of 2022was RMB231.1 million (US$32.5 million),compared with RMB277.0 million in the same period of 2021.

Net income per basic and diluted ADSin the third quarter of 2022was RMB3.96(US$0.56),and RMB3.84(US$0.54),compared with RMB4.80and RMB4.68,in the same period of 2021.

Non-GAAP adjusted net income per basic and diluted ADSin the third quarter of 2022was RMB4.32(US$0.61),and RMB4.20(US$0.59),compared with RMB4.98and RMB4.86respectively,in the same period of 2021.

Cash and cash equivalentswas RMB653.7million (US$91.9million) as of September 30,2022,compared with RMB702.9million as of June 30,2022.

Share Repurchase Plan

OnSeptember 30,the Company announced that its board of directors authorized an increase in its share repurchase program to US$20 million from US$15 million,effective through September 2023. As ofthe date of this announcement,the Company had repurchased an aggregate of 218,178 ADSs and 38,088,855 Class A ordinary shares for a total consideration of US$18.1 million.

On November 16,the Company announced that its board of directors has authorized to further increase its share repurchase program to US$30 million. The share repurchase program will remain effective through September 2023.

Business Outlook

For the fourth quarter of 2022,the Company expects the total loan amount facilitated and originated to be between RMB19.5 billion and RMB21.0 billion. For the full year of 2022,the Company expects the total loan amount facilitated and originated to be between RMB71.5 billion and RMB73.0 billion. This forecast reflects the Company's current and preliminary views,which are subject to changes.

Conference Call

X Financial's management team will host an earnings conference call at 7:00 AM U.S. Eastern Time on November 17,2022 (8:00 PM Beijing / Hong Kong Time on the same day).

Dial-in details for the earnings conference call are as follows:

United States:

1-888-346-8982

Hong Kong:

852-301-84992

Mainland China:

4001-201203

International:

1-412-902-4272

Passcode:

X Financial

Please dial in ten minutes before the call is scheduled to begin and provide the passcode to join the call.

A replay of the conference call may be accessed by phone at the following numbers until November 24,2022:

United States:

1-877-344-7529

International:

1-412-317-0088

Passcode:

3350951

Additionally,a live and archived webcast of the conference call will be available at http://ir.xiaoyinggroup.com.

About X Financial

X Financial (NYSE: XYF) (the "Company") is a leading online personal finance company in China. The Company is committed to connecting borrowers on its platform with its institutional funding partners. With its proprietary big data-driven technology,the Company has established strategic partnerships with financial institutions across multiple areas of its business operations,enabling it to facilitate and originateloans to prime borrowers under a risk assessment and control system.

For more information,please visit: http://ir.xiaoyinggroup.com.

Use of Non-GAAP Financial Measures Statement

In evaluating our business,we consider and use non-GAAP measures as supplemental measures to review and assess our operating performance. We present the non-GAAP financial measures because they are used by our management to evaluate our operating performance and formulate business plans. We believe that the use of the non-GAAP financial measures facilitates investors' assessment of our operating performance and help investors to identify underlying trends in our business that could otherwise be distorted by the effect of certain income or expenses that we include in income (loss) from operations and net income (loss). We also believe that the non-GAAP measures provide useful information about our core operating results,enhance the overall understanding of our past performance and future prospects and allow for greater visibility with respect to key metrics used by our management in its financial and operational decision-making.

We use in this press release the following non-GAAP financial measures: (i) adjusted net income,(ii) adjusted net income per basic ADS,and (iii) adjusted net income per diluted ADS,each of which excludes income (loss) from financial investments,impairment losses on financial investments and share-based compensation expense. These non-GAAP financial measuresare not defined under U.S. GAAP and are not presented in accordance with U.S. GAAP. These non-GAAP financial measures have limitations as analytical tools,and when assessing our operating performance,investors should not consider them in isolation,or as a substitute forthe financial information prepared and presented in accordance with U.S. GAAP.

We mitigate these limitations by reconciling the non-GAAP financial measures to the most directly comparable U.S. GAAP financial measures,which should be considered when evaluating our performance. We encourage you to review our financial information in its entirety and not rely on a single financial measure.

For more information on these non-GAAP financial measures,please see the table captioned "Reconciliations of GAAP and Non-GAAP results" set forth at the end of this press release.

Exchange Rate Information

This announcement contains translations of certain RMB amounts into U.S. dollars at specified rates solely for the convenience of the reader. Unless otherwise noted,all translations from RMB to U.S. dollars are made at a rate of RMB7.1135 to US$1.00,the exchange rate set forth in the H.10 statistical release of the Board of Governors of the Federal Reserve System as of September 30,2022.

Safe Harbor Statement

This announcement contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934,as amended. These forward-looking statements are made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. These statements can be identified by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates," "potential," "continue," "ongoing," "targets," "guidance" and similar statements. The Company may also make written or oral forward-looking statements in its periodic reports to the U.S. Securities and Exchange Commission (the "SEC"),in its annual report to shareholders,in press releases and other written materials and in oral statements made by its officers,directors or employees to third parties. Any statements that are not historical facts,including statements about the Company's beliefs and expectations,are forward-looking statements that involve factors,risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Such factors and risks include,but not limited to the following: the Company's goals and strategies; its future business development,financial condition and results of operations; the expected growth of the credit industry,and marketplace lending in particular,in China; the demand for and market acceptance of its marketplace's products and services; its ability to attract and retain borrowers and investors on its marketplace; its relationships with its strategic cooperation partners; competition in its industry; and relevant government policies and regulations relating to the corporate structure,business and industry. Further information regarding these and other risks,uncertainties or factors is included in the Company's filings with the SEC. All information provided in this announcement is current as of the date of this announcement,and the Company does not undertake any obligation to update such information,except as required under applicable law.

For more information,please contact:

X Financial

Mr. Frank Fuya Zheng

E-mail: ir@xiaoying.com

Christensen IR

In China

Mr. Eric Yuan

Phone: +86-10-5900-1548

E-mail: eric.yuan@christensencomms.com

In US

Ms. Linda Bergkamp

Phone: +1-480-614-3004

Email: linda.bergkamp@christensencomms.com

X Financial

Unaudited Condensed Consolidated Balance Sheets

(In thousands,except for share and per share data)

As of December 31,2021

As of September 30,2022

As of September 30,2022

RMB

RMB

USD

ASSETS

Cash and cash equivalents

584,762

653,722

91,899

Restricted cash

407,276

468,348

65,839

Accounts receivable and contract assets,net

747,480

922,239

129,646

Loans receivable from Xiaoying Credit Loans and Revolving Loans,net

2,484,073

3,751,936

527,439

Loans at fair value

389,679

205,646

28,909

Deposits to institutional cooperators,net

1,500,407

1,631,129

229,300

Prepaid expenses and other current assets,net

213,127

69,543

9,780

Financial guarantee derivative

11,817

-

-

Deferred tax assets,net

274,869

121,287

17,050

Long-term investments

560,038

566,687

79,664

Property and equipment,net

6,188

5,334

750

Intangible assets,net

36,817

37,150

5,222

Loan receivable from Xiaoying Housing Loans,net

12,083

10,061

1,414

Financial investments

82,844

167,099

23,490

Other non-current assets

31,277

62,736

8,819

TOTAL ASSETS

7,342,737

8,672,917

1,219,221

LIABILITIES

Payable to investors at fair value

462,714

250,635

35,234

Payable to institutional funding partners

1,487,379

2,509,891

352,835

Financial guarantee derivative

565,953

319,489

44,913

Short-term borrowings

166,500

90,209

12,681

Accrued payroll and welfare

44,605

47,054

6,615

Other tax payable

219,544

245,500

34,512

Income tax payable

117,148

248,859

34,984

Deposit payable to channel cooperators

21,012

20,100

2,826

Accrued expenses and other current liabilities

268,967

360,344

50,656

Other non-current liabilities

12,019

48,192

6,775

Deferred tax liabilities

-

2,405

338

TOTAL LIABILITIES

3,365,841

4,142,678

582,369

Commitments and Contingencies

Equity:

Common shares

207

207

29

Treasury stock

-

(95,865)

(13,476)

Additional paid-in capital

3,159,523

3,201,238

450,023

Retained earnings

810,856

1,348,212

189,529

Other comprehensive income

6,310

76,447

10,747

Total X Financial shareholders' equity

3,976,896

4,530,239

636,852

Non-controlling interests

-

-

-

TOTAL EQUITY

3,852

TOTAL LIABILITIES AND EQUITY

7,221

X Financial

Unaudited Condensed Consolidated Statements of Comprehensive Income

Three Months Ended September 30,

Nine Months Ended September 30,

(In thousands,except for share and per share data)

2021

2022

2022

2021

2022

2022

RMB

RMB

USD

RMB

RMB

USD

Net revenues

Loan facilitation service

670,885

501,972

70,566

2,057,818

1,482,206

208,365

Post-origination service

88,420

96,026

13,499

220,823

265,673

37,348

Financing income

172,349

251,607

35,370

452,808

717,638

100,884

Other revenue

32,697

45,012

6,328

71,618

141,791

19,933

Total net revenue

964,351

894,617

125,763

2,803,067

2,607,308

366,530

Operating costs and expenses:

Origination and servicing

483,833

540,451

75,975

1,577,209

1,538,011

216,210

General and administrative

39,081

42,590

5,987

125,652

129,078

18,145

Sales and marketing

5,440

3,726

524

15,512

12,952

1,821

(Reversal of) provision for accounts receivable and contract assets

15,237

(4,385)

(616)

57,719

47,386

6,661

Provision for loans receivable

10,199

17,216

2,420

35,695

83,180

11,693

Reversal of provision for contingent guarantee liabilities

-

-

-

(24)

(14,000)

(1,968)

(Reversal of) provision for credit losses on deposits to institutional cooperators

392

(5,407)

(760)

(7,782)

3,127

440

Reversal of provision for credit losses for other financial assets

(382)

-

-

(382)

(765)

(108)

Total operating costs and expenses

553,800

594,191

83,530

1,599

1,798,969

252,894

Income from operations

410,551

300,426

42,233

999,468

808,339

113,636

Interest income,382

643

90

15,990

3,359

472

Foreign exchange gain (loss)

(954)

(13,991)

(1,967)

1,240

(26,137)

(3,674)

Impairment losses on financial investments

-

(8,875)

(1,248)

-

(8,248)

Income (loss) from financial investments

-

1,823

256

-

(7,802)

(1,097)

Fair value adjustments related to Consolidated Trusts

7,570

(4,886)

(687)

(108)

(6,377)

(896)

Change in fair value of financial guarantee derivative

(48,042)

21,649

3,043

(143,658)

46,274

6,505

Other income,net

9,644

6,106

858

16,745

32,134

4,517

Income before income taxes and gain (loss) from equity in affiliates

385,151

302,895

42,578

889,677

840,915

118,215

Incometaxexpense

(119,458)

(91,104)

(12,807)

(214,566)

(314,380)

(44,195)

Gain (loss) from equity in affiliates,net of tax

1,548

(67)

(9)

4,775

10,821

1,521

Net income

267,241

211,724

29,762

679,886

537,356

75,541

Less: net income attributable to non-controlling interests

-

-

-

-

-

-

Net income attributable to X Financial shareholders

267,541

Net income

267,541

Other comprehensive income,net of tax of nil:

Gain from equity in affiliates

-

96

13

-

166

23

Foreign currency translation adjustments

1,957

37,254

5,237

(4,515)

69,971

9,836

Comprehensive income

269,198

249,074

35,012

675,371

607,493

85,400

Less: comprehensive income attributable to non-controlling interests

-

-

-

-

-

-

Comprehensive income attributable to X Financial shareholders

269,400

Net income per share—basic

0.80

0.66

0.09

2.06

1.64

0.23

Net income per share—diluted

0.78

0.64

0.09

2.00

1.60

0.22

Net income per ADS—basic

4.80

3.96

0.56

12.36

9.84

1.38

Net income per ADS—diluted

4.68

3.84

0.54

12.00

9.60

1.35

Weighted average number of ordinary shares outstanding—basic

332,503,053

321,742,209

321,209

329,347,604

328,467,902

328,902

Weighted average number of ordinary shares outstanding—diluted

342,343,280

328,981,034

328,034

339,187,831

335,706,728

335,728

X Financial

Unaudited Reconciliations of GAAP and Non-GAAP Results

Three Months Ended September 30,except for share and per share data)

2021

2022

2022

2021

2022

2022

RMB

RMB

USD

RMB

RMB

USD

GAAP net income

267,541

Less: Impairment losses on financial investments (net of tax of nil)

-

(8,248)

Less: Income (loss) from financial investments (net of tax of nil)

-

1,097)

Add: Share-based compensation expenses (net of tax of nil)

9,719

12,349

1,736

51,006

41,686

5,860

Non-GAAP adjusted net income

276,960

231,125

32,490

730,892

595,719

83,746

Non-GAAP adjusted net income per share—basic

0.83

0.72

0.10

2.22

1.81

0.25

Non-GAAP adjusted net income per share—diluted

0.81

0.70

0.10

2.15

1.77

0.25

Non-GAAP adjusted net income per ADS—basic

4.98

4.32

0.61

13.32

10.86

1.53

Non-GAAP adjusted net income per ADS—diluted

4.86

4.20

0.59

12.90

10.62

1.49

Weighted average number of ordinary shares outstanding—basic

332,728

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